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Science Applications (SAIC) Q1 Earnings Beat Mark, Rise Y/Y

Zacks Equity Research

Science Applications SAIC delivered first-quarter fiscal 2020 earnings of $1.36 per share, beating the Zacks Consensus Estimate of $1.21 and also improving 11% year over year.

Moreover, revenues jumped 37% from the year-ago quarter to $1.62 billion and further outpaced the Zacks Consensus Estimate of $1.61 billion, driven by the acquisition of Engility. However, excluding Engility, revenues dipped 2.8% year over year.

Quarter in Detail

Net bookings for the quarter were approximately $1.4 billion as a result of contract award activities, reflecting a book-to-bill ratio of approximately 0.9.

SAIC’s estimated backlog of signed business orders was approximately $13.6 billion of which, $2.98 billion was funded.

Adjusted operating margin expanded 70 basis points (bps) year over year to 6.3% in the reported quarter.

Adjusted EBITDA margin grew 180 bps to 8.3%, backed by an improved program performance, cost discipline and higher margin portfolio of Engility.

Balance Sheet & Cash Flow

SAIC ended the quarter with cash and cash equivalents of $151 million, down from $237 million reported in the previous quarter.

Operating cash flow was $178 million, up from $22 million in the previous quarter. Free cash flow was $169 million compared with $18 million in the preceding quarter.

Recovery of around $25 million from deferred customer payments as a result of the partial government shutdown in the fourth quarter, buoyed cash flow.

During the quarter, SAIC deployed $70 million of capital, consisting of $44 million in planned share repurchases, $23 million in cash dividends and a $3-million term loan repayment.

Science Applications International Corporation Price, Consensus and EPS Surprise

Science Applications International Corporation Price, Consensus and EPS Surprise

Science Applications International Corporation price-consensus-eps-surprise-chart | Science Applications International Corporation Quote


SAIC maintained revenue and adjusted EBITDA margin target per its report presented at the investors’ conference held in January.

Free cash flow is still expected to be around $425 million in fiscal 2020.

The company’s full-year effective tax rate is forecast in the 22-24% range.

Zacks Rank and Stocks to Consider

Currently, SAIC has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are eGain Corporation EGAN, Rosetta Stone RST and j2 Global, Inc. JCOM, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for eGain, Rosetta Stone and j2 Global is presently projected at 30%, 12.5% and 8%, respectively.

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